Dividend Stock Showdown: Is Coca-Cola or PepsiCo the Better Buy Right Now?
2026-07-20 20:05
•Micah Zimmerman •The Motley Fool
•••• •• Axe Capital view
Dividend Kings: PepsiCo Outshines Coca-Cola for Now
Pepsi offers better income and value than Coca-Cola despite KO’s momentum.
Coca-Cola’s long streak of annual dividend increases is impressive, and its recent 18% share price gain reflects strong execution and global volume growth. But paying 26 times earnings for a 2.5% yield feels steep. Meanwhile, PepsiCo trades at a more reasonable 18 times earnings with a 4.2% dividend yield. It also benefits from activist investor Elliott Management pushing for change and has a solid snack business in Frito-Lay, providing diversification beyond beverages. That makes PepsiCo a more compelling buy for income and value seekers on the JSE who get indirect exposure through global funds. The key risk is whether PepsiCo’s turnaround is executed well. If it stumbles, the premium could quickly evaporate. Knowing the rand’s moves versus the dollar is important here, as a weaker rand magnifies offshore gains. For JSE investors, this sets up a classic yield-versus-momentum choice—PepsiCo is the better starting point today. this is just my opinion and not financial advice
I would buy PepsiCo through global ETFs or funds with higher yield focus and trim Coca-Cola for now given its stretched valuation and lower income. Keep an eye on USD/ZAR, as currency swings will impact returns.
- USD/ZAR
- PEP
- PepsiCo’s turnaround fails to deliver
- Rand strengthens sharply reducing offshore returns
6/10
While Coca-Cola is executing well with strong momentum and a 64-year dividend increase streak, PepsiCo emerges as the better buy today. PepsiCo offers a higher yield (4.2% vs 2.5%), trades at a cheaper valuation (18x vs 26x earnings), and benefits from activist investor Elliott Management's turnaround initiatives. Both are Dividend Kings, but PepsiCo's combination of higher income, lower price, snack diversification through Frito-Lay, and clear catalysts for improvement outweigh Coca-Cola's current momentum.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Micah Zimmerman
Categories: Rates, Equities, Earnings, Capital Returns
Tickers: KO, PEP
Sentiment: Positive - Strong execution with 18% stock gain in 2026, growing global volumes, raised full-year guidance, and 64-year dividend increase streak. However, premium valuation (26x earnings) and low yield (2.5%) limit attractiveness as a new buy. Rated as the better buy despite current underperformance. Offers attractive 4.2% yield, cheaper valuation (18x earnings), activist-driven turnaround catalyst from Elliott Management, Frito-Lay snack diversification, and health-trend positioning. Main risk is turnaround execution uncertainty.
Keywords: dividend stocks, dividend kings, income investing, valuation, activist investor, turnaround, beverage industry, snacks diversification
Insights:
- KO: Positive: Strong execution with 18% stock gain in 2026, growing global volumes, raised full-year guidance, and 64-year dividend increase streak. However, premium valuation (26x earnings) and low yield (2.5%) limit attractiveness as a new buy.
- PEP: Positive: Rated as the better buy despite current underperformance. Offers attractive 4.2% yield, cheaper valuation (18x earnings), activist-driven turnaround catalyst from Elliott Management, Frito-Lay snack diversification, and health-trend positioning. Main risk is turnaround execution uncertainty.